Roofing Contractors Are Not Legal "Insurance Claims Experts"
Gene Veno forwarded two videos made by roofing contractors and asked us to comment on them. The roofing contractors are advertising their services for insurance claims. Here they are:
In Contractors Cannot Legally Negotiate Insurance Claims, I noted the following:
People who act as contractors for policyholders can negotiate insurance claims only if they are licensed attorneys or licensed public insurance adjusters. If properly licensed, they can negotiate only if they are retained by the policyholders. In jurisdictions that allow a contractor to work on and act as a public insurance adjuster on a single claim, I imagine some contractors are retained as both. A conflict of interest seems inherent in the dual roles, and virtually every Bar Association in America would prohibit an attorney from representing a client as a contractor and legal counsel at the same time.
As I noted in Failure to Communicate with the Insured's Contractor is Bad Faith, this does not mean that once a policyholder has retained a contractor or roofing contractor insurance adjusters should not seek out and consider their opinions. However, it is illegal for an insurance adjuster and roofing contractor to negotiate or adjust a policyholder's claim together.
The ad by All Star Roofing seems to indicate that after an insurance claim denial, policyholders should retain All Star Roofing to guide them through the claims process with the insurance company. The ad further indicates something about a "free roof program." My impression is that the first ad encourages policyholders to engage a non-lawyer for legal advice and help with an insurance claim or to engage a contractor to act as a public adjuster. This is the exact activity which the Arizona Department of Insurance warned against in the Contractors Cannot Legally Negotiate Insurance Claims post.
I have noticed a trend at insurance fraud seminars where insurance restoration contractors and roofers are discussed. The insurance restoration industry has exploded over the last dozen years. There are many legitimate players in that industry and some unprincipled players who will do anything to make money. For example, Comments on Unauthorized Public Adjusting noted how some construction contracts are deemed illegal public adjusting contracts by the California Department of Insurance. Problems arise in the insurance restoration industry because it is not licensed by the departments of insurance, and in many venues, there is no government oversight which protects the public at a time of crisis.
I think one of the best observations about this situation was made in Greenspan Public Adjuster Interviewed About Unauthorized Public Adjusting, where lawyer turned public adjuster Masood Kahn said:
We do not let our lawyers, doctors, real estate and insurance agents, etc. engage in their professions without being licensed. Even our mechanics and our hairstylists are regulated and held to a certain minimum standard. Accordingly, individuals negotiating and compromising the rights of policyholders, particularly after they have suffered a loss, must be regulated, licensed and held to a higher standard.
Unfortunately, there are an abundance of construction firms, water and smoke remediation firms, and accounting companies that are engaging in unauthorized public adjusting, and breaking the law regularly, mostly with impunity.
...
Unless a CPA is an employee of the insured, it’s illegal for them to represent a policyholder for compensation in the settlement of an insurance claim without a license. A CPA would be an improper person to measure inventory losses. Additionally, simply having a CPA designation will ensure he/she has the skills necessary to measure and adjust the business interruption aspect of the claim. An insured would need the skills of a forensic insurance accountant who has intimate knowledge of the particular business, and one who is skilled in representing policyholders.
Given the expected strength of Hurricane Irene, I am pretty certain that Gene Veno will make certain the South and North Carolina Departments of Insurance are aware of these important consumer protection issues.
Florida SB 408 expanded upon the role of a contractor when working on an insured loss:
FS 626.854 "Public adjuster" defined; prohibitions
(16) A licensed contractor under part I of chapter 489, or a subcontractor, may not adjust a claim on behalf of an insured unless licensed and compliant as a public adjuster under this chapter. However, the contractor may discuss or explain a bid for construction or repair of covered property with the residential property owner who has suffered loss or damage covered by a property insurance policy, or the insurer of such property, if the contractor is doing so for the usual and customary fees applicable to the work to be performed as stated in the contract between the contractor and the insured.
(17) The provisions of subsections (5)-(16) apply only to residential property insurance policies and condominium unit owner policies as defined in s. 718.111(11).
Conversely, the Florida Department of Financial Services recently bought action against a roofing contractor for allegedly advertising public adjuster services:
The Pulse
Enforcement Actions
Florida Department of Financial Services
Volume 2, No. 4
June 2011
Case:
An investigation of a roofing company alleged that it advertised adjusting services on its website when it was not licensed to do so.
Disposition:
Ordered to cease and desist from advertising it provides public adjusting services.
Consent Order:
http://www.myfloridacfo.com/LegalServices/PublicRecords/DocView.aspx?id=77938&dbid=1
SOURCE: http://www.myfloridacfo.com/Agents/Industry/ThePulse/CaseNotes.htm
Chip,
Unfortunately I see this all the time. These Guy's are slick operators and are almost always storm chasers.
Steven,
I have no problem with businesses making money and "chasing" business--that's capitalism.
I just think people have to do it legally and ethically.
Given your experience in the roofing trade, I appreicate your comments.
Thanks.
I have seen this many times as an adjuster.
I remember one roofing company, I met at the Collins mediation Center, in Florida after Wilma. We were in mediation, and things were getting heated, when the roofer barked at me, "I am representing the insured. It says so right here in our contract!"
He was right, it did say that on his contract. I excused myself from the room and promptly faxed it to Florida Department of Financial Services. I thanked him on his admitting in writing that he was committing a class 3 felony.
SB408 reads in part:
(16) A licensed contractor or subcontractor, may not adjust a claim on behalf of an insured unless licensed and compliant as a public adjuster under this chapter. However, the contractor may discuss or explain a bid for construction or repair of covered property with the residential property owner who has suffered loss or damage covered by a property insurance policy, or the insurer of such property, if the contractor is doing so for the usual and customary fees applicable to the work to be performed as stated in the contract between the contractor and the insured.
Please explain to us what the difference is between "negotiating" and "discussing/explaining" the bid with the carriers representative when all discussions include the scope of damage and the amount of loss how can one distinguish between the two and who is going to oversee or police these conversations?
In my opinion there is no difference and contractors in Florida have been given the green light per the new legislation to go ahead and discuss the scope of damage and $ unit cost pricing in their estimates with the carrier...which is indistinguishable from negotiating or one in the same and they can charge a fee for this representation on behalf of the policyholder....all they need is a work contract with the policyholder with a stated $ amount in the contract. The contract can be a consulting contract and not a repair contract?
Blacks law dictionary reads in part to "negotiate":
"To communicate with another party for the purpose of reaching an understanding....to bring about by "discussion or bargaining" .....
How does a contractor "discuss" their $ bid with a carrier under the new law and not "negotiate" with the carrier's rep?
Invariably these conversations between the carrier's rep and the contractor always come down to "will you do the work for this amount ? " or "will you accept this amount for this repair?" or "why are you replacing this ...can't you clean it or repair it?" or "why are you
charging this amount for this item?" etc.
Please explain to us in the business, to the legislators that allowed this into law, and to the contractors reading this post how they go about "discussing" their bids with the Insured and carrier and to avoid getting prosecuted for the unauthorized practice of public adjusting or law?
The term negotiate is used above. What are we negotiating when rebuilding damaged property? The cost to rebuild something is not a negotiation and most adjusters don't get this. The real problem here is the providers instructing their adjusters to cut cost, and by this we mean denying claims or slashing line items in estimates. The building industry is under attack when insurance providers start to dictate building cost in an effort to transform the process into something akin to medical billing. The cost to build something is the cost, the profit a company makes is not defined in any software models and the proper building techniques are not described in any policy that i have read. The truth is the insurance companies are out to make a profit and the desk adjuster are out to protect those cushy salaries and year end bonus's, thus forcing the hand of contractors to over bill in an effort to maintain a normal pre tax profit for their efforts...
The adversarial nature of the business is defined by the actions of the insurance industry, not a hillbilly in a pick up truck trying to earn a living by helping someone with a damaged property....
All Star Roofing pride their selves in specializing insurance matters by saying "...we will handle the entire insurance claim," they have done this for years. Their objective is to provide quality service to their clients roof. What about the other damage that is caused by the roof? What about business expenses that incurred? It would seem to me that all of their past clients would need to revisit their policy. All Star Roofing is, I hope a licensed roofing service. That is their profession.
I find that All Star Roofing's advertisement to be questionable: "...we will handle the entire insurance claim." When I go to the doctor's office about a problem that may not be their specialty, they will tell me in confidence that is not their expertise. My doctor will gladly refer me to someone who specialized in that area/service. My doctor has informed me that when I am through with that doctor to come back to him to discuss the problem or injury that is their specialty. We as a society, welcome doctors who confidently refer specialist. All Star Roofing, like other contractors who insist on proclaiming expertise in insurance claims process need to adapt the referring of Public Adjuster specialist, whom are specialist in the entire claim process when dealing with property of the policyholder. They are unwisely spending client's time and money. All their concern is the roof. At this point, they are pointing themselves in a place of trouble. All Star Roofing is not licensed to handle the entire insurance claim. What does the Department of Insurance have to say? They must have their clients sign some kind of contract? Could All Star Roofing, and such contractors lose their specialty license because of this?
These companies are a far more serious problem than most people realize. I encountered them both as an IA and as a Public Adjuster.
To call them a nuisance would be a compliment. I lost track of the number of insureds that called me to their home and showed me an appraisal award signed against them by an umpire with a roofer acting as the appraiser.
I complained bitterly to the state regulating agencies many times.
I never saw them hindered by any governing body at all.
MR. MERLIN THANK YOU FOR HELP AND EDUCATE THE COMMUNITY, WE HAVE THE FOLLOWING QUESTION:
IS IT LEGAL FOR THE OWNER AND QUALIFIER A FLORIDA LICENSED GENERAL CONTRACTING COMPANY TO HAVE A FLORIDA LICENSED PUBLIC ADJUSTER ON THE STAFF TO HELP AND REPRESENT THE INSURED FOR FREE AS A PUBLIC ADJUSTER AND BE ABLE TO NEGOTIATE THE CLAIM WITH THE CARRIER BASED ON THE ESTIMATE PREPARED TO OBTAIN THE VALUE OF THE RESTORATION SIGENED CONTRACT BY THE INSURED AND THE CONSTRUCTION COMPANY.?
PLEASE ADVICE.
May,
Good question. I have not thought about that.
My first question--is the service really for free? I mean can everybody just sign up for free and that public adjuster will fully estimate and adjust the claimm with "no strings" attached?
Nothing in life is "for free" unless there are not strings attached and the person doing the work is doing so for a charitable purpose.
Seems to me that the compensation is in the form of the contractor getting paid to do the work. If that is so, not only is it "not for free" but the public adjuster is sharing compensation with a non-public adjuster and the contractor is illegally indirectly trying to get around licensing laws.
There are some attorneys that have public adjuster licenses that sign up clients as a public adjuster and then tell their client they get both an attorney and a public adjuster--but the attorney services are "for free." That is illegal and unethical as well.
Again, these are my first thoughts on the matter without any additional research and I would be curious what others may think.
Eric,
You always raise good points and you are probably right about what often happens in the field egarding ultimate questions.
The law requires insurance adjusters to investigate coverage and evaluate damages. This includes considering and talking with those that may have different estimates of damage. So, I don't see how you can fault the insurance adjuster for seeking information from the contractor.
Do you agree?
THANK YOU MR. MERLIN FOR YOUR ANSWER.
THE REAL QUESTION IS:
IF THE ESTIMATOR OF THE GENERAL CONTRACTOR FIRM HAVE THE PUBLIC ADJUSTER LICENSE, WILL HE/SHE LEGALLY ABLE TO DISCUSS THE LOSS COVERAGE WITH INSURANCE REPRESENTATIVES?
PLEASE ADVICE.
THE BEST WE KNOW GENERAL CONTRACTORS OR CGC STAFF ESTIMATOR CAN HELP THE INSURANCE COMPANY REPRESENTATIVES TO UNDERSTAND THE BASES OF THE RECKON-ESTIMATE PREPARED TO REPAIR THE PROPERTY AS PER SIGNED CONSTRUCTION CONTRACT.
BUT THE QUESTION AGAIN:
IF THE FULL TIME EMPLOYEE ESTIMATOR OF THE CGC COMPANY NOT ACTING AS A PUBLIC ADJUSTER IN THE CASE BUT HAVING HIS/HER ACTIVE PA LICENSE CAN TALK ABOUT INSURANCE COVERAGE AND FACTS OF THE LOSS WITH THE INSURANCE COMPANY ADJUSTER OR ESTIMATOR.
PLEASE ADVICE.
REMEMBER THE ESTIMATOR AND LICESEND PA WORK FULL TIME FOR THE CGC AS A COMPANY ESTIMATOR AND HE/ SHE DON'T HAVE ANY PA CONTRACT WITH THE INSURED AND NO OTHER INTEREST ON THE CLAIM THAN HELP THE INSURANCE COMPANY UNDERSTAND THE BASIS OF THE CONTRUCTION ESTIMATE PREPARED TO REPAIR THE PROPERTY AT PRE LOSS CONDITION. HE/SHE ( THE PA ) WILL BE PAID FOR HIS/HER JOB ESTIMATING THE COST OF REPAIRS AND HIS/HER EMPLOYER THE CGC WILL BE PAID FOR HIS/HER CONSTRUCTION WORK.
AFTER ALL: THE ESTIMATOR FROM THE CONSTRUCTION COMPANY CAN TALK ABOUT "INSURANCE COVERAGE" WITH THE INSURANCE REPRESENTATIVE. YES OR NOT ?
PLEASE ADVICE.
ONCE AGAIN, THANK YOU IN THE NAME OF OUR ENTIRE COMMUNITY FOR YOUR HELP EDUCATING PEOPLE FOR FREE.
May,
It appears if you are looking for a legal opinion on something actually occurring. If so, please retain an attorney to get a legal opinion for the exact circumstances.
In general, a person can act as a public adjuster and adjust a claim only if retained by a policyholder. So, a person under the employ of a contractor and adjusting a claim, which means discussing coverages with the adjuster, is acting illegally because there is no authority to do so. It would be like me acting as an attorney for somebody that had not retained me.
If the person that is public adjuster merely explains the estimate and how it was determined with the insurance company adjuster, anybody can do that with the contractor and it is not illegal nor does it require a license to do so.